Gains of integrating sector-wise pollution regulation: the case of nitrogen in Danish crop production and aquaculture

TY - JOUR

T1 - Gains of integrating sector-wise pollution regulation

T2 - the case of nitrogen in Danish crop production and aquaculture

AU - Jacobsen, Lars Bo

AU - Nielsen, Max

AU - Nielsen, Rasmus

PY - 2016

Y1 - 2016

N2 - This paper extends the Orani-G Computable General Equilibrium model with an externality market. The externality market is modelled with a limited number of pollution permits that are traded between representative firms in different sectors. The model is applied to identify the gains of a common nitrogen regulation system for Danish agriculture crop and aquaculture production. Common regulation across the two sectors is found to increase GDP by euro 32 million, corresponding to 2.2% of their initial GDP contribution. The direct effect in the two sectors is euro 39 million, where the spill-over effect is − 7 million. Full use of recirculation technology in aquaculture entails a further increase in GDP to 106 million. The introduction of a common regulatory system and recirculation technology, simultaneous with a reduction of the common nitrogen cap of 17.6%, corresponding to the current policy objectives, is found to increase GDP by 52 million, 4.1% of their initial contribution. Hence, introducing a common regulatory system and taking advantage of the new technology more than counterbalances the negative socio-economic effect of a cap reduction. The analysis points to the importance of introducing more coherent regulatory frameworks that include all polluters under the same regulatory system.

AB - This paper extends the Orani-G Computable General Equilibrium model with an externality market. The externality market is modelled with a limited number of pollution permits that are traded between representative firms in different sectors. The model is applied to identify the gains of a common nitrogen regulation system for Danish agriculture crop and aquaculture production. Common regulation across the two sectors is found to increase GDP by euro 32 million, corresponding to 2.2% of their initial GDP contribution. The direct effect in the two sectors is euro 39 million, where the spill-over effect is − 7 million. Full use of recirculation technology in aquaculture entails a further increase in GDP to 106 million. The introduction of a common regulatory system and recirculation technology, simultaneous with a reduction of the common nitrogen cap of 17.6%, corresponding to the current policy objectives, is found to increase GDP by 52 million, 4.1% of their initial contribution. Hence, introducing a common regulatory system and taking advantage of the new technology more than counterbalances the negative socio-economic effect of a cap reduction. The analysis points to the importance of introducing more coherent regulatory frameworks that include all polluters under the same regulatory system.

KW - Agriculture

KW - Aquaculture

KW - Computable General Equilibrium model

KW - Externality market

KW - Nitrogen regulation

KW - Sector economic costs

U2 - 10.1016/j.ecolecon.2016.05.009

DO - 10.1016/j.ecolecon.2016.05.009

M3 - Journal article

AN - SCOPUS:84975879878

SN - 0921-8009

VL - 129

SP - 172

EP - 181

JO - Ecological Economics

JF - Ecological Economics

ER -